The Canadian Dollar weakened on Monday as the US Dollar gained strength due to renewed trade tensions. The Trump administration plans to implement stricter tariffs on US trading partners, while previously threatened tariffs have been delayed. Originally, July 9 was the deadline for new tariffs, but this has been pushed back to August. New 25% tariffs have been announced for countries like South Korea and Japan, with more demands expected.

Canadian Dollar Drops as US Dollar Rises

The Canadian Dollar fell more than 0.5% against the US Dollar, pushing the USD/CAD exchange rate above 1.3650. The rise in the US Dollar is connected to trade uncertainties, and upcoming Canadian employment data may show signs of economic trouble. Bearish trends are impacting the Canadian Dollar, with the USD/CAD pair approaching a downward trendline near 1.3700. This indicates possible long-term changes against the US Dollar. The value of the Canadian Dollar is affected by interest rates from the Bank of Canada, oil prices, and the overall economy. Strong economic data could lead to higher interest rates, helping the CAD, while weak data might lead to a decline. The Canadian Dollar is under increased pressure due to trade policy shifts in the US and negative market sentiment. Recent news of new tariff hikes, including 25% levies on South Korea and Japan, has influenced global markets. Though these tariffs won’t be enforced until August, the market’s response has already begun, driving investors toward the safety of the US Dollar. This increased demand for the Greenback has pushed the USD/CAD pair past 1.3650 and closer to a previous downward trendline at 1.3700, suggesting a possible transition from a period of consolidation to a more definite direction.

Effects on the Canadian Dollar and Global Markets

This price shift is closely tied to growing concerns about economic growth in Canada. Upcoming employment data may either reinforce or weaken current expectations regarding the Bank of Canada’s interest rates. If job growth is lower than expected, it may reduce confidence in domestic spending, delay any interest rate increases, and further weaken the Canadian Dollar. Observers will closely monitor new economic data, as it directly influences the Bank of Canada’s policy direction and the Canadian Dollar’s pricing. Additionally, external factors should also be considered. The recent decline in crude oil prices puts more pressure on the Canadian Dollar. As a net oil exporter, Canada is vulnerable when energy prices drop, which can hurt trade balances and decrease demand for its currency. Traders should pay attention to weekly crude oil storage reports and changes in global oil production narratives. From a technical perspective, recent price movement is heading toward either a breakout or rejection at the mentioned downward trendline. If buyers gain traction and close above this point, the focus will shift to the next resistance level between 1.3770 and 1.3800. Broader dollar strength and risk aversion may enhance this movement. Conversely, if prices retreat from these levels, it could signal a return to the middle range. Expect volatility to increase as the revised tariff deadline in August approaches. Any sudden actions by major economies—especially those impacted by the tariffs—may lead to further adjustments in G10 currencies. Traders should remain alert to shifts in global risk sentiment as central banks navigate the balance between inflation and economic stagnation. Given these circumstances, we anticipate heightened sensitivity to domestic data like employment numbers, as well as global factors such as trade announcements and oil inventory levels. Staying event-driven and adjusting positions accordingly may help manage surprises, particularly in periods of thinner liquidity. Effective risk management is crucial; with rising geopolitical tensions and mixed growth signals, strategic hedging or flexible options could provide support. Create your live VT Markets account and start trading now.

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